Exam 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool

Figure 4-3. Paney Company makes calendars.Information on cost per unit is as follows: Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000.The price per calendar is $10. Refer to Figure 4-3.How many units must be sold to yield targeted income of $36,000?

Figure 4-1. Foster Company makes power tools.The budgeted sales are $420,000,budgeted variable costs are $147,000,and budgeted fixed costs are $227,500. Refer to Figure 4-1.What is the budgeted operating income?

Dirth Company sells only one product at a regular price of $7.50 per unit.Variable expenses are 60% of sales and fixed expenses are $30,000.Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales.What is the sales dollars level required to break even at the old price of $7.50?

Figure 4-8. A company provided the following data: Refer to Figure 4-8.How much sales in dollars is necessary to generate a profit of $30,000?

If the contribution margin ratio increases,the break-even point in sales dollars will

If the break-even point increases,the margin of safety increases.

Figure 4-2. Pauley Company provides home health care.Pauley charges $35/hour for professional care.Variable costs are $21/hour and fixed costs are $78,000.Next year,Pauley expects to charge out 12,000 hours of home health care. Refer to Figure 4-2.What is the break-even point in sales dollars?

McCallen Company expects to produce and sell 500 units next month.Data on costs follows: Required:

If the selling price per unit increases,the break-even point in units will

Operating leverage is the use of fixed cost to extract higher percentage changes in profits as sales activity changes.

Sales can decline by how much before losses are incurred?

Melody Company sells a product for $14,variable costs are $10 per unit,and total fixed costs are $5,040.If Melody wants to earn an operating profit of $880,how many units must it sell?

The _________________________ is the proportion of each sales dollar available to cover fixed costs and provide for profit.

To determine the number of units that must be sold to earn a target operating income,one can use the equation for operating income and replace the operating income term with the target operating income.

Rachel Company sells office chairs at $350 each,incurs variable cost per unit of $100,and has a total fixed expense of $30,000.How many units must be sold to achieve a target operating income of $55,000?

On a cost-volume-profit graph,the break-even point is where

Figure 4-3. Paney Company makes calendars.Information on cost per unit is as follows: Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000.The price per calendar is $10. Refer to Figure 4-3.What is the break-even point in sales dollars?

At the break-even point,

If sales remain the same and the margin of safety increases,which of the following is true?

Which of the following is not an assumption of a cost-volume-profit analysis?